Paragraph 18

3660.     The general transitional provision for "employment" and related expressions in paragraph 17 does not provide the correct continuity for the use of employment in clause 89(1)(c). This paragraph provides the correct replacement terms to ensure continuity.

Paragraph 19

3661.     This paragraph concerns notices under section 144(1) of ICTA. It preserves the effectiveness of existing notifications (described as "dispensations" in this Bill), subject to the modifications in paragraph 20.

Paragraph 20

3662.     This paragraph derives from section 58 of FA 2001. It preserves the modifications that those provisions make to the effectiveness of existing notifications to take account of the introduction of mileage allowance payments and mileage allowance relief.

Paragraph 21

3663.     This paragraph derives from section 146(8) of ICTA, which disapplies section 146(6) in cases where the employee first occupies the living accommodation in question before 31 March 1983.

Paragraphs 22

3664.     This paragraph deals with capital contributions made by an employee before 6 April 2003 towards the cost of a car, other than a classic car (as dealt with in clause 147) or accessories attached to it. The paragraph ensures that those contributions continue to be taken into account in calculating the cash equivalent of the benefit of the car for appropriate tax years beginning on or after that date. The paragraph also deals with changes in terminology between the source legislation and the Bill.

Paragraph 23

3665.     This paragraph deals with capital contributions made by an employee before 6 April 2003 towards the cost of a classic car (as dealt with in clause 147) or accessories attached to it. The paragraph ensures that those contributions continue to be taken into account in calculating the cash equivalent of the benefit of the car for appropriate tax years beginning on or after that date. The paragraph also deals with changes in terminology between the source legislation and the Bill.

Paragraph 24

3666.     This paragraph deals with the consequences of the changes in terminology between the source legislation and the Bill where a van is available to only one employee for a period exceeding 30 days that straddles 6 April 2003. The paragraph ensures that the relevant provisions apply irrespective of that employee's level of earnings ("emoluments" in the source legislation language).

Paragraph 25

3667.     Sub-paragraph (1) ensures that loans may be employment-related regardless of when they were made, even if that was before FA 1976 (which introduced the beneficial loans provisions) was passed.

3668.     Sub-paragraph (2) derives from section 161(7) of ICTA. It has the effect that the provisions of the benefits code applying to "stop loss" arrangements do not apply in the case of a holding of shares acquired before 6 April 1976.

Paragraph 26

3669.     This paragraph deals with the change described in Change 28 in Annex 1 (using Y for the number of days in the tax year in place of 365 days) in relation to the alternative method of calculation in clause 183, where the loan is made before 6 April 2003.

Paragraph 27

3670.     The charge to tax under clause 188 may be in respect of a loan made before 2003-2004. This paragraph deals with the fact that this Bill changes the terminology used to describe the beneficial loan arrangements and the charge to tax on them, so that a loan made before 2003-2004 may be an employment-related loan.

Taxable benefits: notional loans in respect of acquisitions of shares

Paragraphs 28

3671.     This paragraph, deriving from section 161(7) of ICTA makes it clear that Chapter 8 of Part 3 of this Bill applies only in relation to shares acquired after 6 April 1976.

Paragraph 29

3672.     This paragraph ensures continuity of the law in respect of events prior to 6 April 2003.

3673.     Sub-paragraph (2) provides the continuity of the law so far as it applies to provisions in Chapter 8 of Part 3 of this Bill in the case of an acquisition of shares prior to 6 April 2003 which gave rise to a notional loan within section 162(1) of ICTA.

3674.     Sub-paragraphs (3) and (4) provide that the original amount initially outstanding is to be used to arrive at the amount of the notional loan outstanding at any subsequent time after 6 April 2003 in accordance with clause 194(3).

Paragraph 30

3675.     This paragraph, deriving from section 161(7) of ICTA, makes it clear that Chapter 9 of Part 3 of this Bill applies only in relation to shares acquired after 6 April 1976.

Paragraph 31

3676.     The charge to tax under clause 199 may be in respect of a loan made before 2003-2004. This paragraph deals with the fact that this Bill changes the terminology used to describe the beneficial loan arrangements and the charge to tax on them, so that a loan made before 2003-2004 may be an employment-related loan.

Paragraph 32

3677.     This paragraph prevents the provisions by which the cash equivalent of the benefit of certain scholarships is chargeable to tax as earnings from applying to scholarships awarded before section 165 of ICTA came into effect in 1983.

Part 4: Employment income: exemptions

Paragraphs 33 and 34

3678.     These paragraphs ensure that the overall exemption limit in clause 241 operates correctly in respect of a qualifying period of absence which straddles 6 April 2003.

Paragraph 35

3679.     This paragraph ensures that amounts in respect of benefits provided or expenses incurred before 6 April 2003 in connection with an employee's change of residence count towards the £8,000 limit on such amounts in tax years beginning on or after that date.

Paragraph 36

3680.     This paragraph preserves the effectiveness of any direction that was made before 6 April 2003 as to what is the "relevant day". That direction remains effective for determining what will be the "limitation day" for the purposes of the Bill. The paragraph thereby also deals with the change in terminology between the source legislation and the Bill.

Paragraph 37

3681.     This paragraph preserves the recovery of tax and information powers of section 588(5) to (7) of ICTA, as the section applies before the date on which this Bill comes into force, for cases where:

• the employee's or the employer's liability to tax for a year has been determined in accordance with sections 588 and 589 as those sections apply before that date, and

• the failure referred to in section 588(5)(a) and (b), as that section applies before that date, occurs on or after that date.

3682.     The paragraph works by disregarding in such circumstances the amendment of section 588(6), and the repeal of sections 588(5)(a) and 589(3) and (4), in Schedules 6 (Consequential amendments) and 8 (Repeals and revocations) respectively.

Paragraph 38

3683.     This paragraph ensures that awards made under Extra-Statutory Concession A57 are taken into account in calculating the "permitted maximum" under clause 322(3), where a financial benefit award for the same suggestion is made under clause 321.

Part 5: Employment income: deductions

Paragraph 39

3684.     Clause 353 provides that a deduction is allowed from earnings charged on remittance where (among other matters) certain expenses are paid in the tax year or in an earlier tax year in which the employee has been resident in the United Kingdom. This paragraph contains provisions designed to ensure continuity where the earlier tax year ended before 6 April 2003, but the deductions fall to be allowed in the tax year 2003-04 or in a later tax year.

Paragraph 40

3685.     Clauses 373 and 374 provide, in certain circumstances, for deductions from earnings for travel costs and expenses of a non-domiciled employee or of members of his family. The travel in question must end on, or during the period of five years beginning with a date that is a "qualifying arrival date" in relation to the employee. This paragraph contains provisions to ensure that the deductions may be given where the qualifying arrival date was before 6 April 2003, but the costs and expenses of the travel relate to the tax year 2003-04 or to a later tax year.

Part 6: Employment income: income which is not earnings or share-related

Paragraph 41

3686.     This paragraph applies to benefits provided by non-approved retirement benefits schemes that were entered into before 1 December 1993 and have not been varied since so as to affect the benefits provided. It derives from the original version of section 596A of ICTA introduced by paragraphs 1, 9 and 18(7) of Schedule 6 to FA 1989.

3687.     Section 596A of ICTA was subject to major changes introduced by section 108 FA 1994. Those changes are reflected in the rewrite of section 596A in Chapter 2 of Part 6 of this Bill. But the changes do not apply to schemes that existed at 1 December 1993 unless the scheme has been varied with a view to changing the benefits provided. Unaltered pre-December 1993 schemes continue to be taxed by the old rules.

3688.     Sub-paragraph (1) gives the conditions for the paragraph to apply.

3689.     Sub-paragraph (2) disapplies clause 393(2). That subsection provides that the charge in Chapter 2 of Part 6 of this Bill does not apply to pension income. This rule does not appear in the original section 596A of ICTA. In practice there would not be a double charge. If a non-approved retirement benefits scheme paid a pension it would be taxed as a pension. It is more likely that the scheme would provide a lump sum that the recipient would use to buy an annuity that would be taxed under Schedule D Case III.

3690.     Sub-paragraph (3) disapplies clause 394(4). That subsection provides that the charge in Chapter 2 of Part 6 of this Bill takes priority over any other charge in the Bill. That rule does not appear in the original section 596A of ICTA.

3691.     Sub-paragraph (4) provides two clauses to be substituted for clauses 395, 396 and 397 in Chapter 2 of Part 6 of this Bill.

3692.     Clause 394A derives from subsections (8) and (9) of the original version of section 596A of ICTA. Tax is not charged on any lump sum financed by contributions paid by the employer provided that the employee has been taxed on those contributions. The difference between this provision and clause 396 is that under the original version of section 596A of ICTA there is no requirement for the scheme funds to be brought into charge to tax.

3693.     Clause 394B derives from subsections (6) and (7) of the original version of section 596A of ICTA. In the original version of section 596A those subsections deal with a benefit that is also an amount taxed by paragraph 1 of the charge to income tax under Schedule E in section 19(1) of ICTA. Subsection (6) provides that the paragraph 1 charge takes priority. But if the charge under section 596A is greater than the charge as an emolument the additional amount is charged under section 596A.

3694.     The new clause 394B preserves this effect by comparing the charge under Chapter 2 of Part 6 of this Bill with the charge on general earnings.

Paragraph 42

3695.     This paragraph ensures that any payments or benefits which were charged under section 148 of ICTA as it was before the changes made in FA 1998 are not chargeable by virtue of Chapter 3 of Part 6 if the payments continue to be made or the benefits provided after 6 April 2003.

Paragraphs 43

3696.     This paragraph ensures that the balance of the £30,000 threshold remaining at 5 April 2003 is carried forward to 2003-2004, or, if it has all been used, nothing more is available.

Part 7: Employment income: share-related income

Paragraph 44

3697.     This paragraph reflects the fact that when inserting sections 140A to 140C into ICTA, section 50(1) of FA 1998 provided that those sections should only have effect for interests acquired after 16 March 1998.

Paragraph 45

3698.     This paragraph ensures that the condition in section 140H(3) of ICTA, which requires earnings from the employment in respect of which the shares are issued to be within Case I of Schedule E, still applies to acquisitions before 6 April 2003.

Paragraph 46

3699.     This paragraph ensures that, in computing the amount of the charge under clause 428, the amounts which would have been deducted under section 140A(7) of ICTA in respect of charges arising before 6 April 2003 are still allowed.

Paragraph 47

3700.     This paragraph provides that the time limit in section 140G of ICTA requiring information about the provision of conditional interests in shares during 2002-03 to be notified within 30 days of the end of that year of assessment still applies. The extended time limit in clause 432 comes into force in respect of conditional interests provided after 5 April 2003. The paragraph also makes it clear that notification is not now required if it has already been given under the corresponding provision in ICTA.

Paragraph 48

3701.     This paragraph provides that the time limit in section 140G of ICTA requiring information about potential charges under section 140A of ICTA during 2002-03 to be notified within 30 days of the end of that year of assessment still applies. The extended time limit in clause 433 comes into force in respect of events occurring after 5 April 2003. The paragraph also makes it clear that notification is not now required if it has already been given under the corresponding provision in ICTA.

Paragraphs 49

3702.     This paragraph reflects the fact that, when inserting sections 140D to 140F into ICTA, section 51(1) of FA 1998 provided that those sections should only have effect for interests acquired after 16 March 1998.

Paragraph 50

3703.     This paragraph ensures that the condition in section 140H(3) of ICTA, which requires earnings from the employment in respect of which the shares are issued to be within Case I of Schedule E, still applies to acquisitions before 6 April 2003.

Paragraph 51

3704.     This paragraph ensures that, in computing the amount of the charge under clause 439, the amounts which would have been deducted under section 140D(6) of ICTA in respect of charges arising before 6 April 2003 are still allowed.

Paragraph 52

3705.     This paragraph ensures that the rules specifying what are deductible amounts in clause 439 operate correctly where there have been a series of conversions at least one of which occurred before 6 April 2003.

Paragraph 53

3706.     This paragraph provides that the time limit in section 140G of ICTA requiring information about potential charges under section 140D of ICTA during 2002-03 to be notified within 30 days of the end of that year of assessment still applies. The extended time limit in clause 445 comes into force in respect of conversions taking place after 5 April 2003. The paragraph also makes it clear that notification is not now required if it has already been given under the corresponding provision in ICTA.

Paragraphs 54 to 56

3707.     Paragraph 54 derives from section 77 of FA 1988 which specifies that Chapter 2 of Part 3 of FA 1988 applies to acquisitions of shares, or interests in shares on or after 26 October 1987. There are variations in that general commencement provision and these are rewritten in paragraphs 55 and 56.

Paragraph 57

3708.     This paragraph provides that the similar legislation in ICTA to that rewritten in Chapter 4 of Part 7 continues to apply to acquisitions before 26 October 1987.

Paragraph 58

3709.     This paragraph ensures that the condition in section 77(2) of FA 1988, which requires earnings from the employment in respect of which the shares are issued to be within Case I of Schedule E, still applies to acquisitions before 6 April 2003. It also reflects the fact that the exemption from this Chapter for certain priority share allocations only applies from 16 January 1991 (by virtue of section 77(4) of FA 1988 which was inserted by section 44 of FA 1991).

Paragraph 59

3710.     This paragraph ensures that, in computing the amount of the charge under clause 455, the amounts which would have deducted under section 79(6A) and (6B) of FA 1988 in respect of charges arising under section 140A or section 140D of ICTA before 6 April 2003 are still allowed.

Paragraph 60

3711.     This paragraph provides that the time limit in section 85(1) of FA 1988 requiring information about acquisitions during 2002-03 to be notified within 92 days of the end of that year of assessment still applies. It has been rewritten here as "before 7 July 2003". The paragraph also makes it clear that notification is not now required if it has already been given under any of the specified shares provisions in FA 1988 or in ICTA.

Paragraph 61

3712.     This paragraph provides that the time limit in section 85(2) of FA 1988 requiring information about chargeable events and chargeable benefits in the 60-day period prior to 6 April 2003 to be notified within 60 days still applies. The extended time limit in clause 466 comes into force in respect of chargeable events occurring and chargeable benefits being received after 5 April 2003. The paragraph also makes it clear that notification is not now required if it has already been given under the corresponding provision in FA 1988.

Paragraph 62

3713.     This paragraph reflects the fact that the number of years referred to in section 135(2) and (5) of ICTA was changed from seven to ten by section 49 of FA 1998.

Paragraph 63

3714.     This paragraph ensures that the condition in section 140(1) of ICTA, which requires earnings from the employment in respect of which the option is granted to be within Case I of Schedule E, still applies to acquisitions before 6 April 2003.

Paragraphs 64 to 66

3715.     These three paragraphs ensure that all amounts that have been chargeable to tax on the receipt of an option before 6 April 2003 are deducted in calculating the amount of the gain arising on exercising, assigning or releasing the option after that date.

Paragraph 67

3716.     This paragraph provides that the time limit in section 136(6) of ICTA requiring information about options granted etc during 2002-03 to be notified within 92 days of the end of that year of assessment still applies. It has been rewritten here as "before 7 July 2003". The paragraph also makes it clear that notification is not now required if it has already been given under any of the specified shares provisions in FA 2000 or in ICTA.

Paragraph 68

3717.     This paragraph contains provisions to ensure that an employee share ownership plan which, before 6 April 2003, was approved under Schedule 8 to FA 2000, is treated as a share incentive plan approved under Schedule 2 to this Bill.

Paragraph 69

3718.     This paragraph contains provisions to ensure continuity of treatment as references to an employee share ownership plan approved under Schedule 8 to FA 2000 are replaced by references to a share incentive plan approved under Schedule 2 to this Bill.

Paragraph 70

3719.     This paragraph provides that a jointly owned company that was a constituent company in a group scheme immediately before the enactment of FA 2002 may remain a constituent company in that group scheme, and accordingly re-enacts section 39(8) FA 2002. Section 39(5) FA 2002 amended the definition of a "jointly owned company" that applies for the purposes of the SIP code.

Paragraph 71

3720.     This paragraph contains provisions to ensure that a savings-related share option scheme, which, before 6 April 2003, was approved under Schedule 9 to ICTA is treated as an SAYE option scheme approved under Schedule 3 to this Bill. This approval has effect even if the scheme does not fully meet the requirements of Schedule 3 so long as it meets the approval requirements of Schedule 9 to ICTA.

3721.     Under sub-paragraph (5) the effect of the provisions of Schedule 9 to ICTA are preserved, including superseded rules, for a savings-related share option scheme approved before 6 April 2003.

3722.     A savings-related share option scheme is defined in sub-paragraph (6).

Paragraph 72

3723.     This paragraph ensures that, for the period before 6 April 2003, a reference to a share option granted in accordance with the provisions of an approved SAYE option scheme includes a reference to a right to acquire shares obtained in accordance with the provisions of a savings-related share option scheme.

3724.     Sub-paragraph (2) reflects the removal from this Bill of references to Case I of Schedule E in ICTA. Here the reference is to "earnings" in paragraph 6(2)(c) of Schedule 3 to this Bill.

Paragraph 73

3725.     This paragraph contains provisions to ensure that a discretionary share option scheme, which, before 6 April 2003, was approved under Schedule 9 to ICTA is treated as a CSOP scheme approved under Schedule 4 to this Bill. This approval has effect even if the scheme does not fully meet the requirements of Schedule 4 so long as it meets the approval requirements of Schedule 9 to ICTA.

3726.     Under sub-paragraph (5) the effect of the provisions of Schedule 9 to ICTA is preserved, including superseded rules, for a discretionary share option scheme approved before 6 April 2003.

3727.     A discretionary share option scheme is defined in sub-paragraph (6).

Paragraph 74

3728.     This paragraph ensures that, for the period before 6 April 2003, a reference to a share option granted in accordance with the provisions of an approved CSOP scheme includes a reference to a right to acquire shares obtained in accordance with the provisions of a discretionary share option scheme.

Paragraph 75

3729.     This paragraph preserves the effect of section 114(9) of and Schedule 16 to FA 1996, in relation to a discretionary share option scheme, as defined in sub-paragraph (5), which was approved before 29 April 1996.

Paragraph 76

3730.     This paragraph preserves the effect of section 115 of FA 1996 for rights obtained under a discretionary share option scheme as defined in sub-paragraph (3) in the period from 17 July 1995 to 28 April 1996.

Paragraph 77

3731.     This paragraph contains provisions to ensure that where, a share option was a qualifying option for the purposes of Schedule 14 to FA 2000 immediately before 6 April 2003, the share option is treated as a qualifying option for the purposes of the EMI code. This applies even where the requirements that had to be met differ from those set out in Schedule 5.

Paragraph 78

3732.     This paragraph reflects the change in approach to a disqualifying event arising in relation to the requirement as to commitment of working time. The new approach operates for the tax year 2003-04 onwards.

3733.     Sub-paragraph (2) reflects the method of determining such an event in paragraph 52 (3) of Schedule 14 to FA 2000.

Paragraphs 79 and 80

3734.     These paragraphs, which relate to clause 536 and 537 respectively, reflect the fact that the amendments made to the EMI code by Schedule 14 to FA 2001 have effect only after the passing of that Act.

Paragraph 81

3735.     This paragraph ensures that the revised wording of clause 540 will work satisfactorily in connection with options granted before 6 April 2003.

Paragraph 82

3736.     This paragraph reflects changes in statutory references in clause 541 (effects on other income tax charges). The changes apply to the provision that sets out the relief in the calculation of a charge on conditional and convertible shares.